A new Paris-Tehran axis

The deal signed by Total for the development of South Pars paves the way for closer relations between a number of European countries, including Italy and Germany, which are ready to support greater opening towards Tehran, bucking the trend set by the rigid stance adopted by the United States and Saudi Arabia

While the United States seems set to continue to impose sanctions against Iran, despite the entry into force of the nuclear deal signed in January 2016, France is leading the way in overcoming the constraints imposed by measures against Tehran, and in setting a new course in bilateral relations with Iran. A clear indication of this is the 4.8 billion dollar agreement signed by the French company Total for investing in Iran’s vast South Pars gas field, in partnership with the China National Petroleum Corporation (CNPC). The newly-elected French President Emmanuel Macron himself has expressed his support for a complete ending of Iran’s economic isolation. Italy and Germany, which so far seem to be moving in the same direction, have in turn signed billion dollar agreements with Iranian officials and have intensified visits to Iran at every level in recent months

Iran's new gas deal

The South Pars deal

A consortium between Total, Petropars and CNCP will underpin the first phase of the investment in the giant South Pars gas field. Under the agreement, the French company will have a 50% share, while the Chinese company CNCP will hold 30% and the Iranian company 20%. Total plans to make an initial investment of one billion dollars. These investments are particularly significant in view of the location of the South Pars fields, which are shared between Iran and Qatar, currently being targeted by international sanctions imposed by the Gulf States.

Total has confirmed that the gas extracted at South Pars within the framework of the agreement will supply exclusively the Iran’s internal market. Liquidity for the deal will be provided by Chinese banks, whereas European banks still seem to be reluctant to start doing business with Iran again. This is especially due to fear of incurring possible sanctions from American banks which are continuing to disregard the 2015 Vienna agreements and to freeze billions of dollars worth of Iranian assets which should instead be have been made available upon the agreement entering into force. During his visit to Riyadh, the U.S. President signed billion dollar deals with the Saudis and embraced their geopolitical approach. This stance, along with the visa ban for Iranian citizens as part of the order imposed by the Trump Administration known as the 'Muslim Ban', has contributed to souring bilateral relations with the United States. According to Sami Zubaida, Professor of History at the University of London (Birkbeck), these are maneuvers by the Saudis, encouraged by Trump, who is affirming his political weight as he seeks to establish his dominance in the region and confront Iran.

Germany, Italy and the end of sanctions against Tehran

As far back as the nineties, the French company Total challenged the sanctions imposed on Tehran by the Clinton Administration. European countries, more generally, are eager to respond to the end of the isolation imposed on Iran in spite of the stand-off policy favored by Republicans in the United States.

Germany has suspended contracts worth 11 billion dollars with Iran, while Italy has agreements valued at 25 billion dollars. These two countries could soon be following the French example and speed up the pace of their investments in Iran. Italy in particular has gone back to being Iran’s top trading partner after years of sliding back following the imposition of international sanctions on the Shia majority country. The visit to Rome by Iran’s chief negotiator on nuclear affairs Javad Zarif in June evinced the return of the traditionally excellent bilateral relations between Italy and Iran. Iran’s foreign policy line was expressed with customary clarity during discussions with senior Italian officials. Zarif confirmed the alliance between Tehran and Damascus and their agreement over the Russian management of the Syrian crisis. According to the Iranian Foreign Minister, only the Syrian people can bring about a legitimate change in the country’s leadership. Moreover, despite attacks by the Trump Administration, the Islamic Republic has also found Putin’s Russia to be a reliable ally in the management of the main crises in the region, noting that Turkey, too, has raised its voice against the isolation of Qatar orchestrated by Saudi Arabia, and is sending direct assistance to the government in Doha to cope with a possible food crisis.

Setting a new course

By signing a multi-billion dollar deal for the management of the South Pars gas field, the French company Total has shown the determination of French officials to end the period of international isolation of Iran. Italy and Germany have been engaged for months in efforts to restore bilateral trade relations with Tehran. The United States and Saudi Arabia, however, are continuing to put the brakes on a return to normal relations with the Islamic Republic despite the entry into force of the Vienna Agreement signed in January 2016. The re-election of Iran’s moderate President Hassan Rohani and the more conciliatory policies of Iran’s Foreign Minister Javad Zarif reaffirm Tehran’s central role in the management of the main crises in the region, and its intention to promote a privileged relationship with Moscow and with a number of European countries.